5 Facts About Social Security
Since its establishment in 1935, Social Security has become an integral part of retirement life. While we may think we know how it operates, there are several facts that often go unnoticed. Here are 5 things about Social Security that might surprise you.
The Social Security trust fund is an enormous entity, with a value of $2.8 trillion as of the end of 2022.
Eligibility for Social Security benefits doesn't require an extensive work history. If you were born in 1929 or later, working for 10 or more years is sufficient to qualify.
The amount of benefits a person receives is based on their average earnings throughout their working life under the Social Security system. This calculation takes into account the 35 highest-earning years. In situations where an individual has experienced low or no earnings during certain years, Social Security may consider those years to reach the total of 35 years.
For 64% of current retirees, Social Security serves as a significant source of retirement income.
It may come as a surprise, but Social Security benefits are subject to federal income taxes. However, this hasn't always been the case. The Amendments to the Social Security Act in 1983 introduced taxation on benefits, starting with the 1984 tax year.
In addition to these facts, it's worth noting that cost-of-living adjustments (COLA) in Social Security benefits were not always automatic. Before 1975, any increase in benefits required an act of Congress. Nowadays, adjustments happen automatically, based on the Consumer Price Index. For instance, there was an 8.7% COLA increase in 2023, following a 5.9% increase in 2022.
Sources: SSA.gov, 2023 and EBRI.org, 2022
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